1. Create shifts  For classwork credit:  There are ten total shifts (5 supply and 5 demand). Come up with a scenario for each.

2. Agenda  Bellringer  Review Questions  Check in: Supply and Demand together graph  Notes: Supply and Demand together  Midterm Thursday and Friday

3. Review Questions  Identify the determinants of demand  BITER  Identify the determinants of supply  RENTS  When more is produced than is demanded, what is the result?  Surplus  When less is produced than is demanded, what is the result?  Shortage

4. Supply and Demand Together Graphs  How did it go?  Are we finished?  Need more time?

5. Supply and Demand Together

6. Objective  Students will draw supply and demand curves and be able to identify equilibrium, surplus, shortage, and illustrate appropriate determinant shifts

7. Supply and Demand  In market and mixed economies, supply and demand work together to help the economy self-regulate  Adam Smith called this phenomenon the “Invisible Hand”  Supply and demand work together to determine prices and prices are the basis of most economic decisions

8. Supply and Demand Schedule

9. Graphing Supply and Demand

10.  Same rules apply for when you graphed them separately. They make an “X”  “Mind your P’s and Q’s” (P(rice) on vertical axis, Q(uantity) on horizontal)  Demand is always downward sloping, Supply is always upward sloping  Always label supply curve (s) and demand curve (d). Search and destroy!

11. Graphing Supply and Demand

12. Working Together  Surplus: when there is more of an item supplied than is demanded. You have “extra”  Signal that price is too high – people don’t want to buy it  How do you alleviate a surplus?  Drop the price!

13. Surplus

14. Shortage  Shortage: quantity demanded is more than what is supplied. There is not enough to go around  Signals that prices are too low! Everyone is buying!  Solution: Raise the price

15. Surplus Shortage

16. Add it all up…  When operating without any restrictions (Laissez-Faire) our market economy will self regulate  This means shortages and surpluses are automatically sorted out by price restructuring – the result is a perfectly balanced market/mixed economy  When an economy reaches equilibrium – it will stay there until either supply or demand shifts

17. Equilibrium  Equilibrium: The price at which supply and demand meet

18. Equilibrium

19. Check for Understanding  Draw a standard supply and demand curve (be sure to label)  Label surplus  Label shortage  Label equilibrium

20. Shifting Together…  When given a scenario ask yourself “Does this affect supply or demand?”  Remember all of your determinants  Example: if a scenario is about technology, obvi it is a supply shift  Trickiest shifts: expectations! Must think of it from either a consumer or producer standpoint.

21. Shifting Together…  After you have determined which line will shift (supply or demand), using labels to identify which direction it will go  Write the determinant that is at work  If applicable – identify the new equilibrium price

22. Visual

23. 1. The income of the Chapel Hill townies declines after an early loss during March Madness. Quantity Price D S D1D1 P1P1 Q1Q1 P2P2 Q2Q2

24. 2. Chapel Hill is named one of the most beautiful towns in North Carolina and tourism doubles Quantity Price D S D1D1 P2P2 P1P1 Q1Q1 Q2Q2

25. 3. The price of blue ties decreases. How does this affect demand for purple ties? (Blue ties are a substitute good for purple ties) Quantity Price D S D1D1 P1P1 Q1Q1 P2P2 Q2Q2

26. 4. The Federal government has been warning the public about the possibility of a recession and job loss in the RDU area. Quantity Price D S D1D1 P1P1 Q1Q1 P2P2 Q2Q2

27. The price of silk increases (ties are made with silk). Quantity Price D S P2P2 S1S1 P1P1 Q2Q2 Q1Q1

28. The government adds a subsidy to tie production. Quantity Price D S S1S1 P1P1 Q1Q1 P2P2 Q2Q2

29. Purple ties are named by GQ magazine as a “must have” for all young professionals. At the same time, a new textile machine decreases the cost of producing purple ties. Quantity Price D SS1S1 D1D1 P1P1 Q1Q1 Q2Q2

30. Practice  Complete the worksheet